Indonesia’s latest consumer price index confirms a slowdown in public consumption. The country’s core inflation has touched its lowest level in 14 years and different reactions are emerging as to whether this is something to celebrate or something that is cause for alarm.
Indonesia’s latest consumer price index confirms a slowdown in public consumption. The country’s core inflation has touched its lowest level in 14 years and different reactions are emerging as to whether this is something to celebrate or something that is cause for alarm.
With 0.07 percent deflation in August, the most significant decline since February last year, the Central Statistics Agency (BPS) records an annual inflation rate of 3.82 percent, which is within the government’s target of 4 percent this year.
Volatile food and administered prices saw deflation of 0.87 percent and 0.48 percent, respectively, in August. Core inflation, a key measure of price changes that reflects people’s purchasing power and real demand, hovered at 0.28 percent.
However, the year-on-year (yoy) core inflation rate demonstrates a declining trend from 3.41 percent in February to 2.98 percent in August. It is the lowest level since August 2003, where it stood at 6.71 percent.
“This should cause us serious concern because August’s core inflation of 2.98 percent is the lowest level in the last 14 years,” Bank Tabungan Negara (BTN) chief economist Winang Budoyo wrote in a research note on Monday.
If the situation is left untreated, he further said, people’s purchasing power will continue to fall and the government’s efforts to boost growth through private consumption could be fruitless.
Lower prices for onion, garlic, fresh fish, transportation, communications services and financial services after Idul Fitri — during which the country usually sees a spike in public consumption — contributed to this deflation, Suhariyanto, the head of the BPS, said.
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